Taking Advantage of a Short Squeeze

Thought I would share with everyone an exciting August event in the Portfolios.

One of our stocks, Badger Daylighting, had been languishing over the last 3 months, and we discovered that there was a large short interest growing in the stock – meaning a hedge fund was shorting the company expecting its shares to go lower in value, likely due to the energy exposure in Badgers operations.

The chart below shows that Badger's short interest is the highest it’s been in the last 3 years. Our analysis of the company didn’t really indicate why they would want to be so short, unlike many of the oil services companies Badger is an extremely portable company, the oil business slowed down and they drove their trucks to new regions to pursue new business opportunities. Badger's balance sheet was very clean and it was flowing cash, the fundamentals were on point.

Source: Bloomberg

The earnings came out Friday morning, Badger companies continued to make money and were optimistic of a recovery in the second half of the year. The shorts were stuck and forced to cover in a rising stock.  This caused Badger to move about 20% in two trading days, a great place to be for investors long the stock.

Source: Bloomberg

We’ve taken advantage of this summer move and taken some profits, during a typical quiet periods in summer markets.

Have a great day, and any further questions feel free to call us.




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